Corporate Social Responsibility at Proctor and Gamble (P&G)

By John Dudovskiy
October 20, 2012

P&GJohnson, Scholes and Whittington (2006) state that Corporate Social Responsibility is concerned with the ways in which an organisation exceeds the minimum obligations to stakeholders specified through regulation and corporate governance.

As we have to analyse the CSR in multinational company, we have to closely analyse the CSR approaches in Global level and sometimes in the country specific level. Furthermore, they also indicate that social responsibility which will have universal elements whilst also being applicable to many different localities.

As the actions of companies in one country may have an impact on other countries (pollution control or trading practices), there is an increasing need to look at the global impact of an organization’s strategies (Johnson, Scholes and Whittington 2006).

Moreover, Gray et al (2007:789) indicate that a business that accepts Corporate Social Responsibility will be prepared to be responsible for and willing to justify its actions. It will also consider the impact of its actions on a variety of individuals and groups, both inside and outside the organization.

It is claimed that the organizations have social and environmental reporting where they report their accountability to all stakeholders and other interested parties. This is referred as silent reports.

However, the reports which are produced by external sources such as newspapers, magazines and other research institutions are referred as shadow accounts or reporting where if the silent accounts are in line with the silent reports.

There are some methods to encourage the Corporate Social Responsibility as mentioned by Gray (2007).

 

Government Intervention:

Governments can intervene directly to ensure that a business accepts the consequences of its behaviour. One of the most common methods of achieving this is through the creation of legislation which businesses must adhere to. This could be for the businesses to reduce their carbon footprint by certain percentage by predetermined date. OrUSgovernment can apply new legislation to heavily charge the companies like BP which is responsible for huge leakage of oil into the water which affects the wildlife and environment (Gray, 2007).

 

Self-Regulation

Johnson, Scholes and Whittington (2006) mention that governments can work with particular industries and business sectors to encourage the creation of regulatory bodies which help control the activities of the businesses.

 

Market Pressures

As free markets can by themselves regulate the businesses operating within it, there is no even need for governments to intervene to encourage corporate responsibility.

The term has caught the much needed attention in today’s business arena where all the corporate giants are spreading one word of their activities, that is, they are socially responsible. The idea of being socially responsible and accountable is new. Even though, there are people who have the concrete belief that history of CSR dates back to when the concept of business was incepted. However, there came a time when businesses had stopped being socially responsible, and they believed that the profits they earn should go in their pockets only, and there was not a concept of stakeholders (Pedersen, 2006).

 

Silent and Shadow Account

The organization that has been chosen to be the subject of silent and shadow account is Proctor and Gamble (P&G). P&G is the world wide famous manufacturer of fast moving consumer goods (FMCGs) company. The company has its operations in nearly 180 countries of the world and with revenue of nearly US $70.03 million in the fiscal year 2009. The company employees nearly 140,000 people around the world and in 2007, it was named as the tenth most admired company in Fortune Magazine. P&G is based inCincinnati,Ohio, formed by William Proctor and James Gamble in the year 1837 (P&G, 2010).

Moreover, the values of P&G states as such”P&G is its people and the values by which we live. We attract and recruit the finest people in the world. We build our organization from within, promoting and rewarding people without regard to any difference unrelated to performance. We act on the conviction that the men and women of Procter & Gamble will always be our most important asset” (Tilak 2009).

Furthermore, the mission statement of the company also states it to provide branded products and services of superior quality and value that improve the lives of the world’s consumers, now and for generations to come. This statement also indicates the company is well aware of the implications and applications of the CSR policies which they have to follow to be a good corporate citizen.

 

P&G and CSR

The key stakeholders of P&G can be identified as their customers’ present world wide, the suppliers, the governments of countries they are present in, the pressure groups around and the diverse employees who work for them.

Hence, the responsibilities of the organization are high. The values, purpose and principles of P&G give the analysis of how the company has planned out its strategy in accordance with the socially responsible attitude. Sustainability in ‘embedded’ in all the efforts and all their actions. The five strategies of P&G are about the products, operations, social responsibility, employees and stakeholders (P&G, 2010).

 

Silent and Shadow account:

A silent and shadow account is the one in which the organization is reviewed through by its own reports such as financial accounts and their own published reports. A shadow account is done to understand their activities and to learn whether the activities said by the companies are true or not and the shadow account is like a critical evaluation for the companies.

Product innovation matters at P&G. They believe that customers are the most important asset of an organization. They want to have the products developed in such way that are innovative, technological, and are environment friendly. Consumers have to be delighted and they must be served with value. Technologically, they believe in life cycle approach of product making. The products after their use are easily recyclable and can be reused. Ariel, a leading laundry detergent is the example of such innovative technology. The new technology applied in Ariel has made it possible to reduce 70% of the energy consumption when clothes are being washed. The new innovation has reduced 40-50% reduction in water consumption, 30-40% less energy, and 14-45% less packaging (P&G, 2010)! Products are disposable, and reuse and recycling are possible to reduce the waste of resources. Environmental practices laid down by law are used, information about the products, i.e., the ingredients and materials used to manufacture the products are provided to the customers, and they are brought into confidence and trust of the company. P&G has Product safety Organization, namely Product Safety and Regulatory Affairs (PS&RA) to make sure that all the products being used are safe for the consumers and do not cause any harm. P&G has also developed an edge over other companies on animal testing. They have come up with alternatives that have eliminated the animal testing and have invested US $ 250 million in this. The product safety claim was violated when in early 2000s, Pampers were tested inGermany, and it was detected that they had poisonous substance used in their manufacturing. Greenpeace discovered that dangerous substance TBT (tributyl tin) was used in ‘Pampers Baby Dry Mini’. The tests were conducted and they were proven to be true by the analysis done by Greenpeace itself. TBT has been the most dangerous substance that can contaminate the environment and it can enter the skin too. It can damage the immune system and well as the hormones (Greenpeace, 2000).
Operations:In this strategy, P&G is working to reduce 20% of carbon emission per unit of its product by 2012.  P&G has reduced energy consumption by 48%, Carbon Emission by 52%, water disposal by 53% and water usage by 52% since July 2002. The Greenhouse Gas affect has been on the rise recently. Even though, P&G is not an organization which is energy concentrated, but it still wants to contribute its part to curb the rising Greenhouse Gas affect. P&G has reduced the CO2 emission by 2.9 million metric tons in 2007, 2.8 million metric tons in 2008 and 2.6 million metric tons in 2009 (P&G, 2010). In 2009, the product of P&G named Vicks Nasal Spray turned out to be contaminated by Bacteria.  All of the stocks dispatched were called back and the bacteria detected was said to have risk of causing serious infections to those who had weak immune system. (Political and Scandal News, 2009).
Social Responsibility:The basic purpose of P&G is to improve the lives of its consumers. They want to bring improvement in the lives of those who are deprived of those necessities and are unable to have an access to them. They are working on to make the lives of children better and more comfortable. They have come up with different programs in order to do that. They have improved the life of nearly 135 million children in the world in 2007. They are working with UNICEF with their brand Pampers to make the life of the young babies healthier and better. According to the research conducted by P&G, nearly 128,000 people pass away suffering from neonatal and maternal tetanus, which is a curable and ironically, a preventable disease. Pampers along with UNICEF is working to provide vaccines to women and children who are in need of it. The customers are also involved in this campaign, as one pack of pampers helps contribute one vaccine for the needy people. In this campaign, nearly 45.5 million of women along with their babies have been saved from these diseases.They have also started a program named Shiksha. The program has been initiated to increase education for children who do not have access to it.Indiais supposed to have the largest population of children who are not educated. The purpose of the program is to educate the children, and assist them with health facilities and schools are being funded for construction. In last past five years they have reached 87,000 children. Nearly 85 villages have gotten rid of the menace named child labour.  The news was there in 2003, that Wal-Mart and P&G were together in a scandal in placing an RFID in the Lipfinity lipstick of P&G. It came to be known that P&G and Wal-Mart were together involved in placing RFID in the lipsticks embedded in the packaging in the Broken Arrow Wal-Mart store in mid July. It didn’t match with the consumer safety and privacy that is claimed by P&G. Wal-Mart, P&G and Gillette broke the law by placing the secret RFID in the products (Spychips, 2003).http://www.rfidjournal.com/article/view/654

By looking at the above findings and collection of facts about P&G it can be concluded that P&G is a socially responsible organisation and it is working for the betterment of the world and the society. The above facts through the silent account reveal that P&G is working hard to become a socially responsible corporation. The programs initiated by the organisation are commendable and they are very much in accordance to the company’s code of conduct and ethics.

The main focus of P&G is to become responsible corporate citizen and its efforts have been discussed in detail. Their programs such as provision of safe drinking water, named Pur, the child welfare program started inIndianamed Shiksha and several other measures depict that how P&G has been working hard to promote the concept of being a socially responsible organisation and how they must sustain their reputation in accordance with it. The silent report of P&G completes many aspects of the organisation such as product innovation, the social responsibility aspect and it also covers the aspect of operational activities of P&G. These activities have been studied in great detail with the help of sustainability report of P&G published every year to let their stakeholders know about the efforts put in by the organisation to become an organisation that not only cares about the profits and its own well being but to become an organisation that wants to look after the public and take care of their interests and wants.

However, the shadow report gives the other side of the picture. The shadow report reveals that how the company has violated the consumer privacy through the RFID. This action reveals that how irresponsibly the company had behaved and how they intruded with the personal lives of the customers. Customers are the most important stakeholders of any organisation. They  must know what they are buying and how their information is being used and for what reasons. The RFID scandal was not only of P&G but Wal-Mart was equally involved in the scam. The activity took place inTulsa,Okla, where the consumers were used as guinea pigs for the research purposes by Wal-Mart and P&G. The organisation had placed the RFID antenna chips in the packets of the lipstick named Max Factor Lipfinity, and the researchers from P&G would know when the lipsticks have been removed from the shelves.

Even though the corporate giant says that they did not mean to invade the privacy of the customers, they still violated the rule and they did view the customer’s action while purchases were being done. This means that a major stake holder group was made to dislike the actions of the organisation and the activities of the company were not tin the favour of the organisation. This can hurt the company’s standing and can give way to nefarious word of mouth being used against them.

Product innovation is said to be very high in P&G and they are very careful with all the products being made. They are very observant on the factors that save energy and consume less amount of water. They are also very much careful about the use of materials in production of the products. They claim that they have not used any harmful or hazardous material in the products.  Recently, the new Dry Max Pampers made by P&G have claimed to be the reason of rashes, burns on the babies who use them. The mothers have become very much concerned about the fact that the pampers a one point have put the babies on ease of dryness, but on the other hand, the babies are getting rashes and they are getting open sores. The organisation claimed that the diapers were tested and they were used on nearly 20,000 babies before being brought out in the market. They have stated that nearly 70% of the people have preferred the use of Dry Max over any other diapers. The concerned mothers, again the consumer of the products have been put into serious reconsideration that whether their babies are safe when they use pampers on their babies. P&G claims that out of 6 millions of pampers, only one complain is received about the diaper rash.  Previously, in 2000, the Baby Dry pampers were also found to have the 38.4 mg of TBT/KG in pampers in the section of the pamper belt and as well as in the layers of pampers. TBT or the tributyl tin is a chemical, a hazardous chemical which can cause damage to the hormones, especially the sex hormones. It also reduces the power of immune system to fight with the bacteria. According to a research conducted in 1999, TBT can disrupt the hormonal system of a human. It is chemical banned by Greenpeace.

Another story to be brought about was of the recalling of the Vicks Sinex Vapo Spray. The discovery of B. Cepacia bacteria was found in nearly 12,000 bottles of P&G’s Vicks Nasal Spray. All of the dispatched orders had been recalled.  There were no reported illnesses or contamination from its use however. Bukholderia cepacia does not carry much risk; however, it can lead to chronic lung cancer to people who have weak immune system. Those of the customers who had purchased the spray were asked to stop the use immediately and they were also given a refund token. This is a very socially responsible action done by P&G to restore the trust of their customers.

InChina, P&G has offered a new working hour policy to the employees who have been employed in the organisation representing P&G China. The policy is that employees have been given the leverage to work five days, of which, one day from home. This step has been taken to ensure that employees are retained in the organisation and they are also enjoying the much needed freedom from work and they are spending the quality time with their family and friends. The policy was much liked the employees who are nearly 6000 in number.

Moreover, according to Social Funds (2010), there still exists the elements of slavery far up the chain and auditing practices do not yet exist to monitor for slavery at second or third tier suppliers which makes it near to impossible to enact an enforceable slavery screen.

 

Recommendations and Suggestions:

Here are some possible Recommendations to further improve the CSR of P&G

  • Protect and respect the privacy of all customers
  • The company should ensure that their products, packaging and operations are safe for existing employees.
  • Reduce or prevent the environmental impact of the products (P&G is already doing well here as it has only around 4% wastage on their production).
  •  Meet or exceed the requirements of all environmental laws and regulations.
  • Continually assess the environmental technology and programs, and monitor progress toward environmental goals
  • provide all possible stakeholders with relevant and correct information
  • ensure every employee feels his/her share of corporate social responsibility in their daily work( while undertaking R&D especially) (Tilak. 2009)

Conclusion:

As we compare the Corporate Social Responsibility activities of the company to its adverse affects which were caused by different or careless actions taken by the company, the favourable CSR policies overweight the balance as the company is planning and undertaking more projects on how to improve their CSR.

However, if we refer to CSR policies which are set out by the company, if the company applies and implements those mentioned policies, it will be considered to be on a line with the generally accepted standards on CSR even though there is no specific one in existence.

The organisation is a multinational corporation, dealing with diverse employees, diverse nature of customers and with nearly 180 countries they work in, they are trying their best to be socially responsible and very much cautious about their acts and works that they do not hurt the environment, the people and their stake holders at any level of their function.

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Category: Corporate Social Responsibility
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